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The profit-structure relationship, efficiency and mergers in the European banking industry: an empirical assessment Author info | Abstract | Publisher info | Download info | Related research | Statistics L.W. Punt
M.C.J. van Rooij
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An empirical investigation of the relationship between market share or concentration and return on equity or assets provides evidence for the existence of a profit-structure relationship in the European banking sector. Testing several market-power and efficient-structure theories reveals that X-efficiency is the crucial factor explaining the profit-structure relationship because it stimulates both profitability and market share. Bank mergers in recent years have been successful because, on average, X-efficiency and profitability have improved after the consolidation. Moreover, there are no indications of unfavourable price setting behaviour as a result of increased market power.
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Paper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number
604.
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Date of creation: Dec 1999Date of revision:
Handle: RePEc:dnb:wormem:604Contact details of provider: Postal: Postbus 98, 1000 AB Amsterdam Web page: http://www.dnb.nl/en/ More information through EDIRC
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Keywords: Profit-structure relationship ; bank efficiency ; bank mergers ; Find related papers by JEL classification: G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.:
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Center for Financial Institutions Working Papers
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Other versions:
Allen N. Berger & Loretta J. Mester, 1997.
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Finance and Economics Discussion Series
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Finance and Economics Discussion Series
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[Downloadable!]
Other versions:
Allen N. Berger & David B. Humphrey, 1997.
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J.A. Bikker, 1999.
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Research Series Supervision (discontinued)
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Allen Berger & Timothy Hannan, 1994.
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Center for Financial Institutions Working Papers
94-29, Wharton School Center for Financial Institutions, University of Pennsylvania.
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Allen N. Berger & Timothy H. Hannan, 1993.
"Using efficiency measures to distinguish among alternative explanations of the structure-performance relationship in banking ,"
Finance and Economics Discussion Series
93-18, Board of Governors of the Federal Reserve System (U.S.).
Jalal D. Akhavein & Allen N. Berger & David B. Humphrey, 1997.
"The effects of megamergers on efficiency and prices: evidence from a bank profit function ,"
Finance and Economics Discussion Series
1997-9, Board of Governors of the Federal Reserve System (U.S.).
[Downloadable!]
Other versions:
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Leo de Haan & Elmer Sterken, 2006.
"Price Leadership in the Dutch Mortgage Market ,"
DNB Working Papers
102, Netherlands Central Bank, Research Department.
[Downloadable!]
Carol Ann Northcott, 2004.
"Competition in Banking: A Review of the Literature ,"
Working Papers
04-24, Bank of Canada.
[Downloadable!]
Marcel Canoy & Sander Onderstal, .
"Tight Oligopolies: In Search of Proportionate Remedies ,"
CPB Documents
29, CPB Netherlands Bureau for Economic Policy Analysis.
[Downloadable!]
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